Kudos (or, “I told you so...

According to the December 21 Automotive News, Subaru’s performance was not based on extrasensory perception, but rather listening carefully to their dealers.  The dealers, you see, carefully listened to their customers.  A number of factors were reported in the piece.  One point was that, despite universal application of all-wheel drive, Subarus are usually priced a bit below facing Hondas, enhancing the brand’s value proposition.  The dealers also called for products that were more usable and a bit larger for their North American customers.  In the case of the Forester, it was raised into another class, which appealed to a great many more buyers.  Dealers also successfully suggested that Subaru, if not become a design leader, at least stop making truly ugly cars.  But the biggest factor was the strategic decision to reverse the direction to take the brand upmarket and become the Japanese equivalent of an Audi or Saab.  We’ve seen how efforts of formerly well-distinguished brands to become front-drive BMWs (see Saab, Audi, Volvo, even Pontiac) have led to indifferent to disastrous effects.  In the case of Subaru sticking to their knitting of being a value-laden brand with some verve and passion in some offerings, such as the halo WRX, has paid off handsomely.

All this bodes well for what is becoming an interesting partner for Toyota.  Already a car with Subaru components, the Toyota FT-86 sports coupe, is anticipated for 2011.  In many ways, it is a car Subaru could not sell.  It is rear drive and a small sports car.  But Subaru’s rear differentials and 2.0L flat four make for an interesting proposition for a Toyota lineup in need of spicing up.  Who knows?  Further synergies with hybrid drive might make for a Honda CR-Z competitor.

Hyundai corporate reminds me a bit of my days selling Just-in-Time logistics services to GM.  When I visited Oldsmobile headquarters in Lansing, they had a sales chart comparing them to the competition – Pontiac and Buick.  From what I understand, intramural competition is alive and well between Hyundai and Kia, but that doesn’t deter strong results.  Kia Division sales are up by about 20,000 units through November, but share is up from 2.1 to 3.0% Kia has done this through a thorough restructuring of their small car lineup, with new Forte sedan and Koup as well as the mini-crossover Soul.  Both the mid-size Optima and small crossover Rio have more than recovered from Kia’s truck side woes, too.  In Kia’s case, it is meeting the current market need for frugal and inexpensive vehicles, and it doesn’t hurt to begin to infuse them with some personality.

Hyundai’s sales success comes from two separate streams.  While Hyundai has been moving upmarket with the Sonata, Genesis sedan and coupe and larger Santa Fe and the Veracruz, sales have been strong all year for “heritage Hyundai” Accent and Elantra models.  For the month of November, for example, sales nearly doubled for the smaller Hyundai cars.  On the other hand, the Sonata was up in November and flat for the year, while the Genesis and Santa Fe models are taking off as well.  Clearly, Hyundai’s moves to larger and more expensive products has been viable.  The company’s moves upmarket may be “the exception that tests the rule” regarding upmarket moves by automakers.  My feeling is that those Hyundai products that are larger and more luxurious, like the Sonata, Santa Fe, Veracruz and Genesis, remain Hyundais in that the tremendous value proposition stays constant.  These vehicles, and probably like the upcoming Equus (or some other car with a less weird name), are the Hyundais of the upscale world.  Not cheap, but with a strong price point for the content.  As long as the Koreans have that advantage, they will be able improve their position in the marketplace.  And it doesn’t hurt that they’ve secured the lowest labor rates in what is quickly becoming the most competitive place in the world to manufacture vehicles, the American South.

When I was contracted by Ford for so many years, the word “headwinds” had great currency.  Lately, though, the Dearborn company has enjoyed great many tailwinds.  Ford’s international footprint is finally paying dividends in the form of desirable and competitive small cars, while the firm’s “no thank you” to the government has cleared the deck for sales of Ford’s traditional wheelhouse, the flag waving F-150 pickup truck.  The company has managed to eke out a profit in the last quarter and is in the middle of a dynamite product blitz.  Momentum is on Ford’s side, will it be maintained?

More than likely, “yes”.  Ford has struck a chord with the new full-size Taurus.  Many people are eagerly awaiting the new Fiesta and the Euro Focus.  I even saw an AOL posting for people to vote on whether the new Euro-based version of the Kuga crossover keep its European name, or keep the successful Escape moniker.  (The answer?  With class leading sales, dropping the Escape brand might not be a disaster, but it would be a foolish waste of brand equity.)  No question, Ford has the vibe going forward.  Will they keep it?

One good sign was the booting around of a $23,000 Fiesta in the press.  What?  Are they serious?  Well, frankly that number was for the most lavishly equipped version, and the vast majority of Fiestas will sell in the $15,000 to $20,000 range.  But still, there may well be a high performance, and high profit, Fiesta that breaks into MINI SC territory.  Amen to that!  While Ford may not have the prestige chops at the moment to move 20,000 ultra-Fiestas (half the MINI sales), there isn’t any reason why the platform can’t be used for entertaining and image setting products.  The rigid pricing ladders of the past should be discarded if it means missing opportunities to set the pace in the market for exciting and passionate automobiles.  There’s little wonder why Automotive News, when they refer to Ford’s European moves, typically reach for a photo of a bright orange Focus ST, a car that screams “performance!”, even in a 1” x 2” thumbnail.  Sure, there may well be Fusions, Foci, and party-hearty Fiestas all piled up in the high-teen and low-twenties price level.  What does it matter if customers snap them up and tell their friends?

VW, on the other hand, isn’t a matter of promise as it is with Ford, but rather of consistently delivering on a brand promise of technically interesting and fun to drive cars for decades.  The Germans’ patience is beginning to pay off in this market, and even if they never reach the uber-dominance they have in Europe, they can keep on making inroads into the center of the American market.

In today’s environment, VW enjoys a shelf full of what are to Americans small cars – the Mexican-built Golfs and (overwhelmingly) Jettas.  They also have some cool larger products, like the Passat and the Passat coupe, known as the CC.  VW’s decision to offer diesel engines hasn’t hurt sales to Rudolf’s devoted followers, either, especially as diesel fuel prices are at near parity to gasoline on a per gallon basis, making fuel economy savings easily calculable and visible.   While Audi sales haven’t risen, they haven’t tanked either.  In many ways, VW has benefited from management inattention, as diversions like the over $60,000 Phaeton were withdrawn from the U.S. market.  Now that the family squabble with Porsche is now over, it is probably no surprise that rumors surface about the expensive luxury car’s return.  Perhaps that won’t happen, as VW will have its hands full with its new car and new plant in Tennessee.

These four firms have managed, through a number of good decisions and maybe some luck, to have improved their position in the American market.  As the government is dictating more fuel-efficient vehicles, each company has innovations to offer in that space, and more small vehicles in the pipeline (although VW is looking to move into the C/D market with its new US targeted product).  They benefit from having competitors that have been stunned in the marketplace.  

While the press releases from GM are all upbeat (or downbeat, if you’re a music fan), they are fumbling with millions of customer “orphans” who may have been loyal in the past, but loyalty is after all a reflexive quality.  GM has dropped popular (and admittedly unpopular) divisions, closed both redundant and non-redundant dealers, and is struggling under the stigma of government ownership.  Over the next few months, clearance sales may buoy monthly sales figures, but sustainable share may be weak.  Chrysler has been notably weak, having little of the residual goodwill GM still carries.  Toyota has been set back by product recalls and being caught out by lackluster new vehicles and a shift away from truck segments Toyota invested heavily in.  Years ago, Honda made one misstep with the original Prelude, but redesigned the car to make a hit in the Mk II version, and rarely put a foot wrong in new products – up until now.  The new Insight missed out on the Honda driving magic and the new Honda Crosstour and the Acura ZDX are just oddly non-utilitarian utility vehicles.  These are expensive mistakes in a tight market.

The new year does bring promise, especially for the companies that are positioned where the market, sales and customers are heading.  Many people think that 2010 also rings in a new decade, a new set of years and perhaps a new automotive order.  Properly speaking, the decade count depends if the new century and millennium began in 2000, as most believe, or in 2001, which is logically correct.  While that debate goes on, the question of a realignment of the automotive stars will not be answered in the next few months, but we’ll have to see if today’s hot performers remain on their perch.